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BofA (BAC) to Add Staff as Commercial Banking Clients Increase
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Following the regional banking crisis in the United States, Bank of America Corporation (BAC - Free Report) witnessed a rise in new clients in its commercial banking division. In order to meet the increased demand, the company has planned to add staff to the unit. The news was reported by Bloomberg.
The president of BAC’s global commercial banking unit, Wendy Stewart, said that the unit saw a 55% year-over-year rise in new clients this May.
Stewart believes that the unit is on track to report 50% growth in customer additions in 2023, an increase from 35% growth reported in 2022.
Stewart added, “Commercial banking is historically a slow and steady business, but this year has been an exception because of disruption in the banking sector.”
Per Stewart, the bank will add workers at its commercial unit, including hiring senior bankers from outside firms. Internal and external hiring will be done gradually, with the activity expected to pick up pace over several years.
Because of the fastest rate hikes since the 1980s and internal risk management issues, the banking industry in the United States faced major turmoil earlier this year. Since March, there have been four bank failures — Silvergate Capital, Signature Bank, Silicon Valley Bank and First Republic Bank.
Notably, BofA was amongst other financial giants that injected $30 billion in deposits into First Republic Bank in a failed attempt to keep the lender afloat. However, First Republic Bank, the second biggest bank failure in history, was ultimately seized by regulators and then acquired by JPMorgan (JPM - Free Report) .
It was expected that the deal would complement JPM’s wealth business and result in increased penetration among high-net-worth clients. Moreover, JPMorgan expected the transaction to generate more than $500 million of “incremental net income” annually.
The above-mentioned banking turmoil resulted in an increase in activity for BofA, whose commercial clients are 80% closely held companies.
In 2022, BofA’s commercial unit witnessed a 9% increase in loan volume. However, Stewart said that lending was “up and down in May.”
Per Stewart, commercial clients remain in “wait-and-see mode” in terms of investments and hiring amid the current tough economic backdrop. Amid signs of a slowing U.S. economy and expectations of a recession, the demand for loans has begun to diminish.
Over the past six months, shares of BofA have lost 9.3% compared with the industry’s fall of 2.5%.
The current challenging economic environment has led several banks to provide a weaker-than-expected outlook for loans.
BofA’s CEO, Brian Moynihan, believes that after a series of interest rate increases by the Federal Reserve to tame inflation, consumer spending has slowed down. Moynihan expects loan growth in the second quarter of this year to be a bit less than that expected earlier.
Per Moynihan, banks, in general, are expected to lose an additional $500-$750 billion in deposits across the industry after experiencing heavy outflows because of the bank failures.
Similarly, JPMorgan’s president and chief operating officer, Daniel Pinto, believes that the demand for loans is declining.
Pinto said, “There is no doubt that regional banks and smaller banks are building up liquidity, building capital, so they are lending a bit less. I don't think that the big banks have really changed their lending standards... there is not a huge amount of loan demand in the first place.”
Fifth Third Bancorp (FITB - Free Report) also moderately reduced its average loan and deposit growth expectations for the second quarter. FITB said that average loans and leases, as well as average deposits, are anticipated to be stable during the quarter, weakening its earlier guidance of stable to up 1% for both metrics.
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BofA (BAC) to Add Staff as Commercial Banking Clients Increase
Following the regional banking crisis in the United States, Bank of America Corporation (BAC - Free Report) witnessed a rise in new clients in its commercial banking division. In order to meet the increased demand, the company has planned to add staff to the unit. The news was reported by Bloomberg.
The president of BAC’s global commercial banking unit, Wendy Stewart, said that the unit saw a 55% year-over-year rise in new clients this May.
Stewart believes that the unit is on track to report 50% growth in customer additions in 2023, an increase from 35% growth reported in 2022.
Stewart added, “Commercial banking is historically a slow and steady business, but this year has been an exception because of disruption in the banking sector.”
Per Stewart, the bank will add workers at its commercial unit, including hiring senior bankers from outside firms. Internal and external hiring will be done gradually, with the activity expected to pick up pace over several years.
Because of the fastest rate hikes since the 1980s and internal risk management issues, the banking industry in the United States faced major turmoil earlier this year. Since March, there have been four bank failures — Silvergate Capital, Signature Bank, Silicon Valley Bank and First Republic Bank.
Notably, BofA was amongst other financial giants that injected $30 billion in deposits into First Republic Bank in a failed attempt to keep the lender afloat. However, First Republic Bank, the second biggest bank failure in history, was ultimately seized by regulators and then acquired by JPMorgan (JPM - Free Report) .
It was expected that the deal would complement JPM’s wealth business and result in increased penetration among high-net-worth clients. Moreover, JPMorgan expected the transaction to generate more than $500 million of “incremental net income” annually.
The above-mentioned banking turmoil resulted in an increase in activity for BofA, whose commercial clients are 80% closely held companies.
In 2022, BofA’s commercial unit witnessed a 9% increase in loan volume. However, Stewart said that lending was “up and down in May.”
Per Stewart, commercial clients remain in “wait-and-see mode” in terms of investments and hiring amid the current tough economic backdrop. Amid signs of a slowing U.S. economy and expectations of a recession, the demand for loans has begun to diminish.
Over the past six months, shares of BofA have lost 9.3% compared with the industry’s fall of 2.5%.
Image Source: Zacks Investment Research
Currently, Bank of America carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The current challenging economic environment has led several banks to provide a weaker-than-expected outlook for loans.
BofA’s CEO, Brian Moynihan, believes that after a series of interest rate increases by the Federal Reserve to tame inflation, consumer spending has slowed down. Moynihan expects loan growth in the second quarter of this year to be a bit less than that expected earlier.
Per Moynihan, banks, in general, are expected to lose an additional $500-$750 billion in deposits across the industry after experiencing heavy outflows because of the bank failures.
Similarly, JPMorgan’s president and chief operating officer, Daniel Pinto, believes that the demand for loans is declining.
Pinto said, “There is no doubt that regional banks and smaller banks are building up liquidity, building capital, so they are lending a bit less. I don't think that the big banks have really changed their lending standards... there is not a huge amount of loan demand in the first place.”
Fifth Third Bancorp (FITB - Free Report) also moderately reduced its average loan and deposit growth expectations for the second quarter. FITB said that average loans and leases, as well as average deposits, are anticipated to be stable during the quarter, weakening its earlier guidance of stable to up 1% for both metrics.